Contingent offers: The basics

In real estate transactions, it’s vital that all parties involved are protected legally. Contingencies are used as an extra layer of protection to make sure both buyers and sellers get the most out of the home buying and selling process. However, some clauses benefit one party, while potentially damaging the other. 

What does it mean when an offer is contingent?

In the world of real estate, contingent means “something depending on specific circumstances. So if a home seller accepts a contingent offer, this means the deal is almost done but won’t be complete until certain standards are met. 

Should I accept a contingent offer?

During the home selling process, it’s best to proceed with caution in regards to contingent offers. A standard home sale may include a home inspection contingency, giving the buyer the freedom to walk away from the home if the home inspection doesn’t come back satisfactory. This may also include forfeiting earnest money from the buyer if the sale falls through. 

However, it’s vital to examine the purchase contract for all home sale contingencies, especially ones that are not standard. For example, some buyers may add a contingency clause saying the purchase of a property won’t proceed until they can sell the home they currently own. 

This can greatly slow down the home selling process and waste time on the side of the home seller. 

How often do contingent offers fall through?

On average, around 5 percent of contingent offers in real estate fall through. However, this number doesn’t capture the cases that continued but with extra difficulty due to extra clauses in the purchase contract. 

Whether there’s a mortgage contingency, home sale contingency, appraisal contingency or any other clauses, it’s vital to comb through the purchase agreement with your real estate agent for optimal results.